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The grade differential (G) is determined by:
1. the quality of the grade;
2. supply and demand for oil products;
3. the strength of the freight market; and,
4. any other relevant factors
Depending on the crude in question, G can range between A+$2 to -$5/bbl. In some cases, the differential can be much larger.
In order to quickly identify which products can be obtained from one crude, producers and refiners must consider the product quality, hence determine the G factor. That’s where we bring in our expertise to determine product quality and derive the gross product worth.
The process is as follows:
W
e collect at least 20 litres of the fuel for analysis and send it to one of our partner laboratories where we obtain, after three to four weeks, the level of Naphtha (Light, Medium, and Heavy), Kerosene, Gas Oil, VGO (Light, Heavy) and residues.
Once this has been realised, we collect market prices from Platts or Argus for the various elements contained in a barrel and the value adjustment is completed with the benchmark crudes such as the Brent or West Texas Intermediate (WTI). For example, a fuel with a lower API° and higher sulphur content than the Brent will normally command less value on the market compared to the Brent.
Marketing Assays are essential to predict how the crude oil will behave in the refinery and how easy will it to produce petroleum products.
The actual crude value roughly equals: Actual product yield (from crude oil) times the Actual sales prices (for products) less the Actual operating costs incurred.
T
he two main factors when making adjustments between crude oils are: the viscosity and Sulphur content. Standard qualities based on viscosity and Sulphur content depend on the markets in which those adjustments are made. For European markets, for example, the standard quality for fuel oil is a viscosity of 70cSt at 80°C at various sulphur contents. The fuel oil yield is adjusted to reflect the viscosity of the 350°C cut versus the standard with a final price reflecting the adjustment made for the sulphur content of the cut.
L
et us assume that a crude oil we have gives a long residue yield of 40% of 350°C cut and that the viscosity of this material is 29cSt with a Sulphur content of 0.5%. Clearly the long residue cut has a viscosity which is better than specification.
In effect, there is an excess in Gas Oil component included in the residue cut. Therefore, we must credit the fuel oil by calculating the amount of additional Gas Oil fraction contained in the long residue.
Leading to: 40*29=GO*2+(40-GO)*70 and since Viscosity does not blend linearly we must use an index to perform the calculation.
VBN= 23.097+33.468*log10 (log10(Visc+0.8))
Thus, 40*28.74=GO*11.4 + (40-GO)*32.04 which yields GO= 6.40%
Similarly, we derive the Sulphur content adjustment:
Thus, 40*0.5=6.4*0.2+33.6*FOS
FOS=0.56
We see that the Sulphur content of the viscosity specification fuel oil has increased from 0.50% to 0.56% as a result of the release of Gas Oil from the residue. In Europe, Sulphur is quoted as high for 3.5% and low for 1%. These are key elements for refiners when they establish values for components.
The next tables summarize the various adjustment steps.
| Crude oil |
Crude X |
Corrected yields |
|
| assay yields |
|
gasoil |
6.40% |
| Gasoil (165-350C) |
32.00% |
Visc Fuel Oil (1% S) |
33,60% |
| Long Residue (350C+) |
40,00% |
Residue S Cont |
0,56 |
| |
|
Std Qualities |
| Qualities |
Crude X |
Gas Oil |
Fuel Oil |
| Gas Oil. SG |
0,830 |
0,840 |
|
| Gas oil, Sulf %wt |
|
0,200 |
|
| Long Residue, Sulf %wt |
0,50 |
|
|
| Visc CSt @ 80°C |
29,00 |
2 |
70,00 |
| REFUTAS VBN |
28,74 |
11,40 |
32,04 |
| Fuel Oil Viscosity Yield Correction |
| 40 * 28.74 = (40 - GO) * 32.04 + GO * 11.4 |
| GO = 40 * (32.04 - 28.74) / (32.04 - 11.4) |
| Additional Gas Oil Yield = |
6,40% |
|
| Fuel Oil Sulphur Correction |
| 40 * 0.5 = 6.40 * 0.2 + (40 - 6.40) * FOS |
| FOS = ((40 * 0.5) -(6.4 * 0.2)) / (40 - 6.4) |
| Corrected Fuel Oil Sulphur = |
0,56 |
|
| Product Prices ($/mt) |
|
Sulphur (% wt) |
| Low Sulphur Fuel Oil |
300,00 |
1 |
| High Sulphur Fuel Oil |
250,00 |
3,5 |
| Sulphur Adj ($ / 0.1% S) |
2,00 |
|
| Visc Corrected Residue |
308,9 |
0,56 |
| 300 + ((1 - 0.5) * 2.0 * 10) |
| Product Prices ($/mt) |
|
SG |
| Gasoil (0.2%S) |
600,00 |
0,840 |
| Crude X Gas Oil |
|
0,830 |
| SG Corrected Gas Oil |
607,23 |
|
| 600 *(0.840/0.830) |
| Crude Oil X Gross Product Worth |
| API Gravity |
38,3 |
|
|
|
|
| Density |
0,830 |
|
|
|
|
| Barrels/Tonne |
7,565 |
Product Prices ($/mt) |
Corrected Yields (%wt) or Prices |
Corrected Prices ($/MT) |
Product Worth ($) |
| Sulphur Content % wt |
0,95 |
| Assay Yields (wt%) |
| LPG |
1,70% |
500 |
1,70% |
500 |
8,50 |
| Naphtha (165C-) |
26,30% |
550 |
26,30% |
550 |
144,65 |
| Gasoil (165-350C) |
32,00% |
600 |
32,00% |
607,23 |
194,31 |
| Long Residue (350C+) |
40,00% |
|
33,60% |
308,9 |
103,78 |
| Add Go Yld |
|
|
6,40% |
600 |
38,40 |
| |
100,00% |
|
100,00% |
|
|
| HSFO |
|
250 |
|
|
|
| LSFO |
|
300 |
|
GPW ($/MT) |
489,64 |
| |
|
|
|
GPW ($/Bbl) |
64,72 |
This is the type of expertise needed by our clients before negotiations. Having a clear vision regarding the value of the crude and possibly the products derived from it, is an essential tool to have if our clients are to secure the best possible deals.
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